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Waters and Beatty Release Committee Staff Report Highlighting Diversity Shortcomings at America’s Largest Investment Firms

Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the Committee on Financial Services, and Congresswoman Joyce Beatty (D-OH), Chair of the Subcommittee on Diversity and Inclusion, released a Majority staff report entitled, “Diversity and Inclusion: Holding America’s Largest Investment Firms Accountable.”

Immediately after George Floyd’s murder, large firms and financial institutions made public statements which included commitments to diversify their workforce and implement programs, practices, and policies that aim to increase both racial and gender equity. To promote transparency and accountability for diversity performance and encourage economic inclusion, the Committee requested data from investment firms with assets over $400 billion to report and comment on their diversity and inclusion data and practices.

The data requests were designed to inform Congress of the diversity levels, policies and practices of the country’s largest investment firms.

Highlights from Committee Staff Findings:
For full list of findings, please see the report here. Below are some of the highlights of the Committee staff report:

  • Workforce Diversity  
    • Racial and ethnic groups experience different levels of representation. Across all employees who are people of color, Black and Latinx employees were highly represented in administrative support roles or other non-professional level roles but were less likely to be represented in executive/senior level or mid-level manager roles. Meanwhile, Asian Americans were most represented in technician, professional, and first/mid-level manager role, compared to support roles and senior level roles.

  • Board Diversity 
    • Of the firms that made 2020 racial justice commitments, only one committed to increasing board diversity.
    • People of color are underrepresented on investment firm boards (17.5%).

  • Procurement
    • While almost two-thirds of firms reported having policies to support diverse suppliers, few reported spending with women-owned or minority-owned firms. Of firms that responded to the request, all reported spending 4% or less of asset manager spending with women-owned or minority-owned firms.
    • Only 14 of the 28 firms (50%) that responded to this request provided at least some information on women-owned businesses and minority-owned businesses with which they are doing business. The average percent spent with women-owned firms ranged from 11.63% for non-professional spending to 0.30% for underwriting. The average percent spent with minority-owned firms ranged from 17.13% for human resources to 0.50% for asset management subcontracting. 

  • Asset Management Diversity
    • Only 9 of the 28 firms (32%) that responded to this request provided information on women-owned asset managers with which they are doing business. Of these firms, they spent on average 0.57% of total asset management services spend with women-owned businesses. 
    • Only 9 of the 28 firms (32%) that responded to this request provided information on minority-owned asset managers with which they are doing business. Of these firms, they spent on average 3.96% of total asset management services spend with minority asset managers. 

  • Underwriting Procurement Diversity 
    • Only 6 of the 28 firms (21%) that responded to this request provided information on women-owned and minority-owned underwriters with which they are doing business. Of these firms, they spent on average 0.30% of total underwriting services spend with women-owned businesses and 9.47% with minority asset managers. 

The Committee staff report recommended that Congress consider the following legislative actions to improve diversity and inclusion at America’s largest investment firms:

  • Workforce Diversity 
    • Investment firms should collect disaggregated data regularly on workforce, executive and board diversity, as well as conduct regular audits on pay and racial equity. 
    • Investment firms should partner with historically Black colleges and universities, minority serving institutions and community colleges to build talent pipelines into these organizations.

  • Board and Executive Leadership Diversity 
    • Investment firms should consider at least one diverse candidate for all executive positions and board positions when there are openings. 

  • Overall Procurement Diversity 
    • Investment firms should consider diverse suppliers whenever a procurement takes place, especially when contracting for asset managers. 
    • Investment firms should develop pipeline programs for diverse asset managers to manage increasingly larger portfolios.

To view the full report on diversity and inclusion practices in America’s largest investment firms, click here.

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